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AA sees its roadside recovery unit return to growth

Management expects the growth in membership to continue in the first half of the current financial year


The AA PLC (LON:AA.), a recovery stock (in more than one sense of the word), saw its roadside recovery unit return to growth last year.

The group, which has had a torrid time since being dumped on the stock market in 2014 at 250p a share by a group of private equity firms, said it expects to announce growth in what it called “trading EBITDA” (i.e. adjusted underlying earnings) for the year to the end of January in line with market expectations.

The heavily indebted outfit said it saw strong free cash flow that was also in line with market forecasts.

The group said paid membership of its roadside recovery scheme returned to growth in the second half of the year, resulting in membership levels at the end of the year being broadly unchanged from a year earlier.

Management expects the growth in membership to continue in the first half of the current financial year.

The AA said its insurance business - comprising its broker, in-house underwriter and its financial services business - continues to deliver strong rates of growth, in line with management expectations.

During the year, both the motor and home books grew in line with expectations, reflecting the strong profitable growth of the group's in-house underwriter and the benefit of ongoing investment in systems to further accelerate the growth of the broking business.

"In Roadside, we continue to deliver best-in-class customer service and have returned our paid membership base to growth,” said Simon Breakwell, the group's chief executive officer.

“Our B2B [business-to-business] business is performing well with strong renewal rates as well as new wins. Our focus in B2B remains building accretive long-term partnerships utilising our operational scale, service excellence, and innovative approach to customer solutions. Lastly, the Insurance business is delivering strong rates of profitable policy growth, and we expect this to continue next year," he added.

The shares were up 4.7% at 47.2p in early deals.

Quick facts: AA PLC

Price: 33.5 GBX

Market: LSE
Market Cap: £208.82 m

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